Cipriani & Werner recently represented Allegis Group in Allegis Group v. WCAB (Coughenaur), Pa. Commw. No. 977 C.D. 2010, filed October 20, 2010, in which the Commonwealth Court outlined the standards for awarding penalties for alleged late payment of compensation. The employer had accepted a specific loss of the thumb. The claimant had exhausted his specific loss benefits and filed a Petition alleging a neurological injury separate and apart from the specific loss. During the course of the litigation the parties reached an agreement to resolve the matter via Compromise and Release Agreement.

 The Compromise and Release Agreement was approved by Decision and Order circulated October 17, 2008. The lump sum payment in the amount of $60,000 was sent to the claimant’s address where he had received his specific loss payments. There was no evidence in the record that the claimant notified the employer or third party administrator of a change of address.

The payment was issued within thirty (30) days from the circulation of the Decision and Order, but because of the delay by the United States Postal Service in forwarding the mail to his new address, the claimant did not receive the lump sum payment until December 10, 2008. The judge made extremely prejudicial comments against the employer at the first hearing in the presence of the claimant and his mother which essentially precluded amicable resolution of the petition. The judge imposed a thirty-five percent (35%) penalty ($21,000), finding that the claimant endured a severe hardship without a finding that the employer violated the Act or acted inappropriate in any way. The employer appealed to the Board and the Board affirmed.

The Commonwealth Court dispelled the longstanding belief that §428 of the Act provides employers thirty (30) days to pay an award without fear of penalties. The Commonwealth Court stated that a penalty is theoretically available where the employer refused to pay compensation for a single day. Although penalties may be available for a de minimis delay, the court stated that “penalties should be tied to some discernable and avoidable wrongful conduct.” The ultimate standard is whether the employer acted with reasonable diligence.

The court concluded the judge’s Findings of Fact were inconclusive as to whether the employer violated the Act where the claimant established no proof that the employer was notified of the change of address. On remand, the judge issued revised Findings of Fact and Conclusions of Law noting that the employer was not guilty of discernable and avoidable wrongful conduct and acted with reasonable diligence under the circumstances. The award of penalties was ultimately overruled.